Tag Archives: supply chain

WASHINGTON (Reuters) – The Trump administration is “turbocharging” an initiative to remove global industrial supply chains from China as it weighs new tariffs to punish Beijing for its handling of the coronavirus outbreak, according to officials familiar with U.S. planning.

President Donald Trump, who has stepped up recent attacks on China ahead of the Nov. 3 U.S. presidential election, has long pledged to bring manufacturing back from overseas.

Now, economic destruction and the massive U.S. coronavirus death toll are driving a government-wide push to move U.S. production and supply chain dependency away from China, even if it goes to other more friendly nations instead, current and former senior U.S. administration officials said.

“We’ve been working on [reducing the reliance of our supply chains in China] over the last few years but we are now turbo-charging that initiative,” Keith Krach, undersecretary for Economic Growth, Energy and the Environment at the U.S. State Department told Reuters.

“I think it is essential to understand where the critical areas are and where critical bottlenecks exist,” Krach said, adding that the matter was key to U.S. security and one the government could announce new action on soon.

The U.S. Commerce Department, State and other agencies are looking for ways to push companies to move both sourcing and manufacturing out of China. Tax incentives and potential re-shoring subsidies are among measures being considered to spur changes, the current and former officials told Reuters.

“There is a whole of government push on this,” said one. Agencies are probing which manufacturing should be deemed “essential” and how to produce these goods outside of China.

Trump’s China policy has been defined by behind-the-scenes tussles between pro-trade advisers and China hawks; now the latter say their time has come.

“This moment is a perfect storm; the pandemic has crystallized all the worries that people have had about doing business with China,” said another senior U.S. official.

“All the money that people think they made by making deals with China before, now they’ve been eclipsed many fold by the economic damage” from the coronavirus, the official said.

ECONOMIC PROSPERITY NETWORK

Trump has said repeatedly that he could put new tariffs on top of the up to 25% tax on $370 billion in Chinese goods currently in place.

U.S. companies, which pay the tariffs, are already groaning https://www.reuters.com/article/us-health-coronavirus-tariffs/trumps-tariffs-add-to-pandemic-induced-turmoil-of-u-s-manufacturers-idUSKBN22C1MY under the existing ones, especially as sales plummet during coronavirus lockdowns.

But that does not mean Trump will balk at new ones, officials say. Other ways to punish China may include sanctions on officials or companies, and closer relations with Taiwan, the self-governing island China considers a province.

But discussions about moving supply chains are concrete, robust, and, unusually for the Trump administration, multi-lateral.

The United States is pushing to create an alliance of “trusted partners” dubbed the “Economic Prosperity Network,” one official said. It would include companies and civil society groups operating under the same set of standards on everything from digital business, energy and infrastructure to research, trade, education and commerce, he said.

The U.S. government is working with Australia, India, Japan, New Zealand, South Korea and Vietnam to “move the global economy forward,” Secretary of State Mike Pompeo said April 29.

These discussions include “how we restructure … supply chains to prevent something like this from ever happening again,” Pompeo said.

Latin America may play a role, too.

Colombian Ambassador Francisco Santos last month said he was in discussions with the White House, National Security Council, U.S. Treasury Department and U.S. Chamber of Commerce about a drive to encourage U.S. companies to move some supply chains out of China and bring them closer to home.

China overtook the United States as the world’s top manufacturing country in 2010, and was responsible for 28% of global output in 2018, according to United Nations data.

The pandemic has highlighted China’s key role in the supply chain for generic drugs https://www.reuters.com/article/us-health-coronavirus-pharmaceuticals-ap/chinas-coronavirus-induced-supply-chain-woes-fan-concerns-of-possible-drug-shortages-idUSKBN20Y1C7 that account for the majority of prescriptions in the United States. It has also shown China’s dominance in goods like https://www.reuters.com/article/us-health-coronavirus-amazon-com-cameras/exclusive-amazon-turns-to-chinese-firm-on-u-s-blacklist-to-meet-thermal-camera-needs-idUSKBN22B1AL the thermal cameras needed to test workers for fevers, and its importance in food supplies.

HARD SELL FOR COMPANIES

Many U.S. companies have invested heavily in Chinese manufacturing and rely on China’s 1.4 billion people for a big chunk of their sales.

“Diversification and some redundancy in supply chains will make sense given the level of risk that the pandemic has uncovered,” said Doug Barry, spokesman for the U.S.-China Business Council. “But we don’t see a wholesale rush for the exits by companies doing business in China.”

John Murphy, senior vice president for international policy at the U.S. Chamber of Commerce, said that U.S. manufacturers already meet 70% of current pharmaceutical demand.

Building new facilities in the United States could take five to eight years, he said. “We’re concerned that officials need to get the right fact sets before they start looking at alternatives,” Murphy said.

Trump White House pledges to punish China have not always been followed by action.

A move to block global exports of chips to blacklisted Chinese telecoms giant Huawei, for example, favored by hawks in the administration and under consideration since November, has not yet been finalized.

(Additional reporting by Alex Alper, David Lawder, Matt Spetalnick and David Brunnstrom; Writing by Heather Timmons; Editing by Tom Brown)

KUALA LUMPUR (Reuters) – Disposable rubber gloves are indispensable in the global fight against the new coronavirus, yet a month’s lockdown in stricken Malaysia where three of every five gloves are made has upended the supply chain and threatens to hamstring hospitals worldwide.

The world’s biggest maker of medical gloves by volume, Top Glove Corp Bhd, has the capacity to make 200 million gloves a day, but a supplier shutdown has left it with only two weeks’ worth of boxes to ship them in, its founder told Reuters.

“We can’t get our gloves to hospitals without cartons,” Executive Chairman Lim Wee Chai said in an interview. “Hospitals need our gloves. We can’t just supply 50% of their requirement.”

The virus, which emerged in China at the end of last year, has left Malaysia with the highest number of infections in Southeast Asia at nearly 1,800 cases, with 17 deaths. To halt transmission, the government has ordered people to stay home from March 18 to April 14.

Glove makers and others eligible for exemption can operate half-staffed provided they meet strict safety conditions. Still, the Malaysian Rubber Glove Manufacturers Association (MARGMA) said it was lobbying “almost every hour” to return the industry to full strength to minimize risk to the global fight.

Dr Celine Gounder, an infectious diseases specialist at the New York University School of Medicine, said she was using up to six times as many gloves as normal each day due to the number of patients with COVID-19, the illness caused by the virus.

“If we get to the point where there is a shortage of gloves, that’s going to be a huge problem because then we cannot draw blood safely, we cannot do many medical procedures safely.”

GLOBAL CALL

With glove supplies dwindling, the U.S. Food and Drug Administration on its website this month said some gloves could be used beyond their designated shelf life. On Tuesday, the United States lifted a ban on imports from Malaysian glove maker WRP Asia Pacific who it had previously accused of using forced labor.

Britain’s Department of Health & Social Care has urged Malaysian authorities to prioritize the production and shipment of gloves that are of “utmost criticality for fighting COVID-19,” showed a letter dated March 20 to glove maker Supermax Corp and shared with Reuters.

MARGMA is considering rationing due to the “extremely high demand,” its president Denis Low told Reuters. “You can produce as many gloves as you can but then there’s nothing to pack them into.”

Under normal circumstances, Top Glove can meet less than 40% of its own packaging needs. For the remainder, it said just 23% of suppliers have gained approval to operate at half strength.

“We are lobbying almost every hour, we are putting in a lot of letters to the ministry,” said Low. “We are lobbying hard for the chemical suppliers and we want to ensure that the printers are also being given approval and any other supporting services, even transportation.”

In a statement, MARGMA said that as they were having to rely on half of their staff to work overtime during the lockdown, costs would rise by up to 30% and that buyers had agreed to bear that.

Malaysia’s Ministry of International Trade and Industry on Tuesday said it had received masses of applications to operate through the lockdown, and that it was seeking cooperation from industries to give way to those producing essential goods.

AUTOMATION

Developed economies are home to only a fifth of the world’s population yet account for nearly 70% medical glove demand due to stringent medical standards. At 150, U.S. glove consumption per-capita is 20 times that of China, latest MARGMA data showed.

MARGMA expects demand to jump 16% to 345 billion gloves this year, with Malaysia’s market share rising two percentage points to 65%. Thailand usually follows at about 18% and China at 9%.

Top Glove said orders have doubled since February and it sees sales rising by a fifth in the next six months. Its stock, with a market value of about $3.5 billion, has risen by a third this year versus a fall of 16% in the wider market.

The company, with customers in 195 economies, registered the highest net money inflow last week among listed Malaysian firms, along with peer Hartalega Holdings Bhd, showed MIDF Research data. Other glove makers include Kossan Rubber Industries Bhd and Careplus Group Bhd.

“We are fortunate enough to be in essential goods,” said Lim. “These few months and at least the next six months will be an all-time high in terms of sales volume, revenue and profit.”

With more than 80% of its 44 factories worldwide automated, Top Glove itself is less impacted by the lockdown than its more labor-intensive domestic suppliers. Packaging woes aside, however, ramping up production could turn under-supply into over-supply when the coronavirus outbreak finally subsides.

“This outbreak will create awareness and make humankind healthier,” said Lim. “People will pay more attention, they will invest more, they will buy more so demand will be more.”